It should come as no surprise that as of December 2017, the total revolving debt has reached $1.023 trillion dollars.
And this is in addition to mortgage debt, car loans, and especially student loan debt, all of which have even larger average balances than credit cards for most Americans.
The good news is that despite this high level of credit card debt for so many of us, there are still options available.
Below are 6 simple ways you could lower your credit card debt going forward:
- Consumer credit counseling
- Debt management programs (DMPs)
- Debt settlement programs
- Balance transfers
- Consolidation loans
- Negotiating directly with your credit card companies (for a lower rate)
In this article, we’ll examine each of these options in detail so you can decide which one best fits your needs.
Option #1: Consumer Credit Counseling
The first step everyone should take when attempting to lower their credit card debt is to schedule a consumer credit counseling session.
These free sessions are usually 45-60 minutes during which a credit counselor will review your entire financial situation and create a written action plan for you to follow based on your income and expenses.
When choosing a credit counseling service, make sure they are both accredited and certified by a regulating body. This will ensure that you are going to a trusted organization with your credit needs.
Many reputable credit counseling services operate as nonprofit entities so there is no reason to pay a fee for their services.
Sometimes these sessions are enough to help borrowers manage their credit card debts on their own going forward. But if not, credit counselors are then able to help them with the next step: enrolling in a debt management program (DMP).
Tip: It’s also a good idea to know exactly where your credit stands before you speak with a consumer credit counselor. You can get free copies of all three credit reports (Equifax, Experian, and TransUnion) once a year at AnnualCreditReport.com.
Option #2: Debt Management Programs (DMPs)
Debt management programs (or DMPs) involve a credit counselor working directly with your creditors to lower your interest rates and make your monthly payments more affordable going forward. (To be clear, these programs do not lower your principal amounts, just your interest rate and monthly payments.)
With a DMP, your new monthly payments will be made directly to your credit counseling agency. This agency will act as a third-party administrator who then disburses the payments to your creditors.
Credit counseling services do this through pre-arrangements they have with most large financial institutions. These arrangements allow them to both lower your interest rate and expedite the payment process on your behalf.
Debt management programs typically have repayment terms of 3-5 years and require that you close all associated credit card accounts when you enroll. (This may require a lifestyle adjustment for some, so plan on arranging other options beforehand!)
Payments made through a DMP will be lower than what you were previously paying and for a set amount over the term of your program. When discussing enrollment, counselors will want to ensure that you can make all future payments for the entirety of your term, not just a month or two.
The good news is as one creditor is paid off, a larger portion of your standard payment goes toward satisfying the next, making the following payoff that much quicker.
When enrolling in a DMP, ensure that all fees are listed up front. Enrollment fees should also be extremely low, if at all.
Enrolling in a DMP will not affect your credit score directly. (However, the way in which your creditors choose to report your accounts to the national credit bureaus may have a negative effect. Be sure to ask about this possibility as well before you enroll.)
If you think a debt management program might be right for you, here are three companies to consider:
- Consolidated Credit – Consolidated Credit has been a trusted source of credit counseling and debt management solutions for over 20 years and have successfully helped more than 5 million people with their debt solutions. They are an ANAB Accredited company, an EIFLE Award winner for excellence in financial literacy education, and have an A+ rating from the BBB. You can contact them at 1-800-320-9929.
- Cambridge Credit Counseling – A nonprofit credit counseling service with over 20 years of experience helping customers with their credit card and unsecured debt solutions. They are ranked as one of the best credit counseling and DMP services for 2017 and are a Consumer Affairs Accredited company with an A+ rating from the BBB.
- GreenPath – Also ranked as one of the best credit counseling and DMP services for 2017, GreenPath is a nonprofit financial wellness company with over 55 years of experience helping customers with their debt solutions. They are also a Consumer Affairs Accredited company with an A+ rating from the BBB.
Option #3: Debt Settlement Programs
Your third option is enrolling in a debt settlement program (often referred to as “debt resolution” or “debt negotiation”).
Where DMPs focus on lowering your interest rate, debt settlement programs involve lowering the total amount you owe. Through a debt settlement program, the amount you owe is reduced and then paid off in one lump sum (or possibly over time if a term settlement is agreed to).
Debt settlement can be a great option if your financial condition reaches a point where you are unable to pay off your debts in 2-3 years. This is because in order to convince your creditors to consider a debt settlement arrangement, you will have to prove true financial hardship.
Due to your limited ability to pay, debt settlement programs typically reduce total debts to between 15% to 75% of the amount owed. Creditors are often willing to do this as an alternative to you declaring bankruptcy and paying them nothing.
Debt settlement companies are often less regulated than DMPs so it’s very important to use a reputable law firm or private company when choosing a program. You should also ensure that they are accredited by a regulating body such as the AFCC.
The exact details of your debt settlement program will depend on your ability to pay, the law firm or settlement company you go with, and the policies and procedures of your creditors. It’s important that you understand these policies from the beginning in order to find the best option for your needs.
Often, debt settlement companies will want you to collect a certain amount to offer as repayment to your creditors before they begin, which can result in much larger interest payments and penalties. Again, make sure you understand the details of your debt settlement program before you enroll.
Unfortunately, unlike DMPs, enrolling in a debt settlement program will have a direct negative effect on your credit score.
If you think a debt settlement program might be right for you, here are three companies to consider:
- National Debt Relief – Recognized as one of the nation’s top debt settlement companies, National Debt Relief is BBB Accredited and has helped over 100,000 customers get out of debt successfully. You can contact them at 1-888-979-9776.
- CuraDebt – A debt settlement company with an impressive savings average of 40% after fees, CuraDebt is one of the top-ranked settlement companies for 2017. They work with clients with as little as $5,000 in debt and is both AFCC and IAPDA Accredited. You can contact them at 1-877-850-3328.
- New Era Debt Solutions – Known as having one of the most transparent debt settlement websites online, New Era Debt Solutions is also one of the top-ranked settlement companies for 2017. New Era also has shorter time frames for repayment, lower fees, and an average debt reduction of 44%. They are both BBB and IAPDA Accredited. You can contact them at 1-800-527-4421.
Option #4: Balance Transfers
Your fourth option for lowering your credit card debt is to complete a balance transfer. The process involves simply opening up a new credit card, with a much lower rate, and then transferring the balance of your current card to this new one.
The lower interest rate on your new card means that you start saving from your very first payment. But not only that, many new cards offer 0% interest
for the first 12-21 months, which compounds your savings significantly during that initial period.
In these cases, it’s important to pay as much of your debt as possible during that time. And be sure to make every payment on time (as failure to do so will result in cancellation of this 0% interest benefit from then on).
However, it’s also important to keep in mind that you may be required to pay a balance transfer fee when doing this. This fee is actually charged by the financial institution that gave you the new card, and will depend entirely on the amount transferred (this is NOT a flat fee).
Balance transfer fees are often in the form of a standard amount or a percentage of the balance transferred, whichever is higher. And these fees are charged up front. However, there are cards that have NO transfer fees, so it’s very important to do your research before making a decision.
There are also credit card that offer no balance transfer fees AND 0% interest for an initial period. This allows you to pay down your debt interest-free during this time. Talk about a win-win!
Tip: It’s also important not to close your old card during this time. Tempting as this might seem, doing so will actually HURT your credit going forward. It’s best to simply cease using this card from that point forward while you focus on paying off your balance.
Below are links to some of the top-rated credit cards for 2017 for those interested in a balance transfer:
Option #5: Consolidation Loans
Consolidation loans are another option that can help you lower your credit card debt. These are loans made directly to a borrower in order to consolidate credit card debts and other personal loans into a single new loan.
These loans offer the benefits of a single monthly payment going forward and often with lower rates and fees. They are especially helpful for those with high-interest credit card debts.
To be clear, consolidation loans roll your current debts into a single new loan, usually with a lower interest rate and fees, they do not lower your principal balance.
Once enrolled, you will make fixed monthly payments to your lender for a term usually from 2-5 years. Your new interest rate on this loan will be determined by your credit history and will be fixed for the life of your loan.
For those with poor credit, consolidating unsecured debt—such as credit cards—may not result in a lower interest rate.
With good credit, you may also have the option of extending your term, which can result in lower monthly payments but much more paid in total interest. As always, make sure you understand the details of your consolidation loan before you enroll!
If you think a consolidation loan might be right for you, here are some options to look into:
- Lending Club – As the nation’s largest Peer-To-Peer lender, Lending Club offers personal consolidation loans anywhere from $1,000 up to $40,000. While having stricter credit requirements, their rates are very competitive and their website is extremely transparent. The company is A+ rated and BBB Accredited.
- PersonalLoans.com – This company can connect you with lenders in all 50 states for consolidation loans up to $36,000. They offer very competitive rates and an easy-to-understand website while acting strictly as a referral company for other lenders. You can contact them at 1-800-772-2274.
- Avant – Focusing on borrowers with lower credit scores, Avant makes direct loans to borrowers and offers funds in as little as one day for up to $35,000. They also offer flexible repayment terms despite slightly higher APRs.
Option #6: Negotiating Directly With Your Creditors
When it comes to lowering credit card debt, there may be certain situations where going through a DMP or any other program is not the best choice.
In fact, one option when attempting to lowering your credit card debts is to simply cease using your credit cards altogether, contact each company directly, and request a rate reduction.
This strategy has the added benefit of not affecting your credit score and can be a great option if your circumstances allow it.
If they initially turn you down, simply make a few larger-than-normal payments and then make another request a few months later. While this make take several calls, your efforts will be well worth it.
There’s a good chance that if you show a sincere effort to pay back what you owe, your credit card company may have more of an incentive to work with you on the rate.
During this time, always devote your repayment efforts toward paying off your cards with the highest interest rates first, as this can save you sizable amounts in interest alone.
As with most financial solutions, the right option when it comes to lowering your credit card debt will depend largely on your individual circumstances.
However, regardless of which option you choose to pursue, rest assured that when it comes to lowering your credit card debt, you do have options!
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.